Transcript Powerpoint - Halifax Initiative

Policies responses to unfettered
finance
Pablo Heidrich
October 20th, 2009
LICs at glance
• LICs: 43 countries
Rwanda, Bangladesh, Haiti, Senegal, Benin, Kenya, Sierra
Leone, Burkina Faso, Somalia, Burundi, Kyrgyz Republic,
Tajikistan, Cambodia, Laos, Tanzania, Central African
Republic, Liberia, Togo, Chad, Madagascar, Uganda,
Comoros, Malawi, Uzbekistan, Congo, Mali, Vietnam,
Eritrea, Mauritania, Yemen, Ethiopia, Mozambique, Zambia,
Gambia, Myanmar, Zimbabwe, Ghana, Nepal, Guinea, Niger
•
•
•
•
•
•
Total population: @ 1 billion
Total GDP: US$ 1.2 trillion
Fiscal expenditures: 22% of GDP
Current account: US$ -37bn (2008)
Openness to trade (X+M / GDP): 45%
Aid received: $45 bn (2008)
Crisis transmission
mechanisms
• Exports down by 30% so far (July 2009)
• Trade balance worsened by US$ 20bn
• Remittances down by US$ 4bn, at US$ 36bn
• FDI inflows down by US$ 15bn, at US$ 13bn
• Aid constant at US$ 45bn
• IMF and other multilateral aid re-conditioned
Crisis effects
• Rise in poverty:
– At least 100 million people more living on US$1.25
per day
• Fall of 2% in average per capita income in only 9
months
• Worsening social indicators in public health,
education and security due to rising fiscal deficits
• Increased political instability and rising levels of
violence in fragile states
• So, what can be done?
• Just looking at transmission
mechanisms, under the assumptions
that:
– This crisis has significant effects that can
be reduced
– Other crises will arise in the near to
medium term future
What can be done on trade?
• Short term: protect against protectionism
– Maintain MDBs trade financing schemes one
more year
– Support LICs in WTO disputes and negotiations
• Mid-term: build hedging capacity
– Help LICs diversify in products and destinations
– Regulate speculation on commodity prices
• Long-term: trade income for development
– Support state-led efforts to channel gains from
trade into domestic economy
What can be done on FDI?
• Short term goal: reduce income shortfall
– Take responsibility for FDI withdrawals in aid
commitments
– Pressure MNCs to review withdrawals
• Mid-term: increase policy space
– Review TRIMs and stop selling CSR as its
substitute
– Revise BITs and ICSID’s referee role
• Long-term: incorporate development
– FDI must create entrepreneurial and technical
capacities instead of enclaves
What can be done on
financial flows?
• Short term: expand emergency funding
– IMF-WB new facilities are under-committed and represent
not much new
– Review conditionality and pre-conditionality to actually
increase lending
• Mid-term: make private flows sustainable
– Help restructure debt bonds to reflect actual payment
capacity
– Assist debt renegotiations to protect LICs, not only OECDbased creditors or debt issuers.
• Long-term: a permanent anti-shock facility
– Adjust fund availability to LICs needs, defined in terms of
their populations’ welfare, not current account indicators.
What can be done on
remittances?
• Short term: extend social safety nets
– Acknowledge migrants and temporary foreign workers
contributions
– Keep pressing banks to reduce commissions on wiretransfers
• Mid-term: pressure UMICs and others to improve
– ½ of LICs migrants go to other developing countries, where
often wages are more volatile, deportations more frequent,
and migrants have worse financial security
• Long-term: take a hard look at your “developmental” self
– Northern protectionism engineering Southern migration (ie.
services in NAFTA, agriculture in EU and East Asia).
What can be done on aid?
• Short term: map out your responsibility & act on it !
– Follow up on your MNCs, your reduced imports, your
deported migrants or refused temporary foreign workers
and target your aid accordingly.
– Understand that crises are intrinsic to a globalized
economy, not an exception to be treated ad-hoc
• Mid- to long-term: revise international frameworks
– Expand ownership criteria to allow real and changing
priorities of LICs governments
– Balance longer term Northern global goals with shorter
term Southern demands